1998 (1) TMI 329 - AT - Central Excise

Summary

Issues:
1. Interpretation of Modvat provisions and declaration requirements under Rule 57G.
2. Whether loan licensees can be considered manufacturers under the Central Excise Act.
3. Validity of Modvat credit availed by loan licensees on behalf of principal manufacturers.

Analysis:
1. The case involved an appeal against an order passed by the Commissioner of Central Excise (Appeals) regarding the availing of Modvat facility by the appellants, who manufactured medicines on behalf of a loan licensee. The issue was whether the appellants, as loan licensees, had complied with the declaration requirements under Rule 57G. The Assistant Commissioner held that the appellants should have filed the declaration in their own name and maintained the Modvat account in their name. However, the Commissioner (Appeals) set aside this order, stating that the loan licensee had mentioned the appellant's name in their declaration and that the credit was availed only on the final product manufactured on behalf of the principal manufacturer.

2. The Department, represented by the ld. DR, objected to the liberal view taken by the Commissioner (Appeals) and argued that the loan licensee was obligated to file the Modvat declaration in their name as the manufacturer. The Department contended that the loan licensee should have followed all Central Excise Procedures, as authorized by the principal manufacturer. The respondent's counsel, on the other hand, relied on legal precedents, including a Gujarat High Court judgment and Tribunal decisions, to argue that loan licensees can be considered manufacturers under the Central Excise Act, irrespective of owning a factory.

3. The Tribunal, comprising Members K.S. Venkataramani and J.N. Srinivasa Murthy, carefully considered the submissions and factual background of the case. They noted that the Department had accepted the earlier declaration filed by the respondents until an audit objection was raised. The Tribunal found that the loan licensees could be considered manufacturers under the latter part of the Central Excise Act's definition. Referring to a precedent involving an amalgamated firm, the Tribunal held that the substantive part of the declaration already filed by the respondents was valid, and there was no justification for disallowing the Modvat credit. The Tribunal concluded that the lapse on the part of the respondents in not filing a declaration in their own name was not serious enough to deny the Modvat credit, especially since a revised declaration was subsequently filed. Consequently, the appeal was rejected, and the impugned order was upheld.